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Castlight (CSLT) Q4 Earnings In Line, Revenues Beat Estimates

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Shares of Castlight Health Inc. (CSLT - Free Report) went up more 23% on Mar 1, 2019 after the company reported fourth-quarter 2018 results. Notably, Castlight shares have gained 82% year over year, substantially outperforming the 25.8% rally of the industry it belongs to.

The company reported non-GAAP net earnings of 1 cent per share which was in line with the Zacks Consensus Estimate. The figure improved from the year-ago quarter’s loss of 3 cents per share.

Revenues surged 13% year over year to $42.1 million and surpassed the Zacks Consensus Estimate of $41 million.

Subscription revenues (94% of total revenues) increased 17% to $39.4 million. Professional services & other (6% of total revenues) declined 22.7%year over year to almost $2.7 million.

On a pro forma basis, the company ended fiscal 2018 with annualized recurring revenues (“ARR”) of $150.5 million which was flat year over year, primarily owing to a loss of a major customer in July.

Transparency-only ARR accounted for 11% of total ARR in fiscal 2018, down 20% year over year. Platform clients accounted for the remaining 89% of total ARR.

The company had approximately 270 signed customers at the end of the quarter, out of which roughly 30% were Fortune 500 companies.

Operating Details

Non-GAAP gross margin came in at 68%, flat year over year. Subscription gross margin expanded 380 basis points (bps) to reach 82.7%.

Non-GAAP sales & marketing expenses as percentage of revenues contracted 900 bps to 22.6% in the reported quarter. General & administrative expenses contracted 230 bps to 11.9%.

Moreover, non-GAAP research & development expenses contracted 440 bps to 29.7%.

Castlight reported non-GAAP operating income of $1.9 million against the year-ago quarter’s operating loss of $4.4 million.

Cash Position

As on Dec 31, 2018, total cash, cash equivalents & marketable securities was $77.3 million. Cash flow from operating activities during the quarter came in at $7.5 million.

Guidance

For 2019, Castlight forecast revenues between $153 million and $158 million. The Zacks Consensus Estimate is pegged at $157.2 million.

Non-GAAP operating income is expected in the range of $0-$5 million. Non-GAAP earnings per share are anticipated between 0-3 cents per share. The Zacks Consensus Estimate is pegged at 1 cent.

Zacks Rank and Key Picks

Castlight carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Symantec Corporation (SYMC - Free Report) , Pegasystems Inc. (PEGA - Free Report) and Fortinet, Inc. (FTNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Symantec, Pegasystems and Fortinet have a long-term earnings growth rate of 7.9%, 8% and 16.8%, respectively.

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